The Stock Market and the Economy's Apparent Disconnect
When he’s talking to his fellow economists, Roger Farmer describes the stock market and the economy as “co-integrated random walks.” For lay audiences he prefers a clarifying metaphor: two staggering drunks connected by a long rope. Sometimes the stock market and the economy go in the same direction, sometimes not. But tied together as they are, they can never get too far apart. “The relationship has been quite strong,” says Farmer, a Briton who teaches at the University of California at Los Angeles. “It’s one of the most stable things I’ve seen in the postwar period.”
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